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Estimates and qotes - your legal rights

31 October 2015

Sue took her old truck to a firm that built truck bodies and asked it to modify the truck so it could carry stock. The firm gave Sue a written estimate and told Sue that the truck would be ready in about a week.

Sue hadn’t heard anything for six weeks so she phoned the firm to see how things were going. The manager advised Sue that the work had been a bit more difficult that they had anticipated but the truck would be ready in a few days. When Sue went to pick up the truck she was shocked when she received the invoice – it was nearly double the estimate Sue had been given. The manager told Sue that the estimate stated that the firm could charge more because work had been much more difficult than the firm had anticipated. Sue wants to know her legal rights. Does she have to pay more than the estimated amount?

What is an estimate?

An estimate is the service provider’s calculation of what the work is likely to cost based on past experience. The service provider will not be legally bound by the estimate. However, customers should be able to rely on estimates as being a reasonable idea of what the work will cost. Estimates (and quotes) can be verbal or in writing. It is preferable to get the estimate (or quote) in writing.

What is the difference between an estimate and a quote?

If you want certainty about the price you should get a quote. Unlike an estimate, when you accept a quote there is a legally binding contract in place for the service provider to do the specified work at that price.

Can the price differ from the estimate or quote?

You can be required to pay more for the work if you agree to additional work after the quote or estimate is given, or if the quote or estimate allows service provider to charge more. You should therefore read the estimate or quote carefully. If the quote does not mention GST, you are entitled to assume the quote includes GST.

What if the estimate or quote is misleading?

If the estimate or quote is going to be significantly different from the quoted or estimated price, then you may have rights under the Fair Trading Act. 1986. This Act prohibits misleading or deceptive conduct in trade. Businesses cannot make false or misleading statements about a variety of matters – including statements about the price and whether additional charges may be made. If the final price for work exceeds an estimate by, say, 10 – 15%, or even 20%, then it may be unreasonable and you may have rights under the Fair Trading Act.

What are Sue’s legal rights?

Sue does not believe she has agreed to pay double the estimated price. She also believes that the price charged is unreasonable and that she has been misled as to what she will have to pay and how long the work will take.

If Sue cannot reach agreement with the firm as to what she should pay, she can pursue her claim in the Disputes Tribunal. (The Disputes Tribunal can hear any contractual claim or claim under the Fair Trading Act for up to $15,000 (or up to $20,000 if both parties agree).) If the claim is for more than $15,000 (or less than $20,000 and the firm will not agree to the claim being heard by the Disputes Tribunal), then Sue will need to pursue her claim in the District Court.

Sue can also contact the Commerce Commission. The Commerce Commission enforces breaches of the Fair Trading Act. The Commission might be prepared to investigate the firm’s conduct and bring its own action.

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.

Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.